What to watch for from Microsoft at CES

Here’s a preview of what to watch for from Microsoft at the Consumer Electronics Show in Las Vegas next week. Look here for full coverage starting at 6:30 pm Wednesday, when I will post on the news set to be announced during Ballmer’s keynote.

Windows Mobile: At a dinner in Santa Clara, Calif., in early September, Microsoft Corp. CEO Steve Ballmer boasted of Windows Mobile’s standing in the smart phone market: Over the past year, he said, smart phones with Windows Mobile installed had outsold both Research in Motion’s BlackBerry and Apple’s iPhone.

When Ballmer takes the stage at the Consumer Electronics Show in Las Vegas on Wednesday evening, it is doubtful that he will want to quote any smart phone market statistics.

Two recent reports show that both Research in Motion and Apple have surpassed Microsoft in the smart phone market.

One reason: Smart phones have moved from the office to the home, where Windows Mobile is perceived to be weakest.

“What has taken them by surprise is they thought smart phones were still for the corporate world,” said Matt Rosoff, an analyst at Redmond-based Directions on Microsoft.

So, bloggers and analysts say, Ballmer might use the Consumer Electronics Show to push his vision for Microsoft in the consumer phone market.

After all, Ballmer has said that the phone is crucial to Microsoft’s consumer strategy.

“These days, the mobile phone is the PC that goes in your pocket,” said Michael Gartenberg, an analyst at Jupitermedia. “Given that, as well as phones increasingly taking on entertainment capabilities, (Microsoft) is going to want to make sure that Windows Mobile is perceived as viable, as relevant in an age when there is so much attention given to other platforms.”

It’s unclear if Ballmer, who will be joined on stage by Entertainment and Devices Division President Robbie Bach, will announce new consumer-centric phone services for Windows Mobile or simply talk up Windows Mobile’s prospects.

Possibilities abound.

Gartenberg said that in large part what Ballmer needs to do is communicate to consumers what is already available via Windows Mobile.

“Microsoft shipped 18 million licenses last year, a very significant number by anybody’s count,” he said. “We’ve got every major carrier” offering multiple Windows Mobile phones.

So, Gartenberg said, Microsoft might want to show off some phones with Windows Mobile installed that have “not reached the threshold of consumer consciousness” and also features that the Windows Mobile platform already includes, such as the many third-party applications available for it.

In terms of announcements, one possibility is that Microsoft will talk about taking some of its Zune music player’s services, such as its music store, to Windows Mobile-powered phones.

“I know almost for sure they are working on some sort of Zune interface for mobile phones,” Rosoff said. CES “seems to be a very logical place to introduce that. The question is whether any of this stuff is done.”

Another possibility would be an Apple-like application store for Windows Mobile applications or a revamping of the Windows Mobile user interface. Gartenberg said Windows Mobile was very much in need of a facelift.

At least one possibility, though, has been ruled out: Microsoft has denied rumors that it will release a phone of its own, using the Zune brand.

Indeed, doing so would seem to contradict what Ballmer said in Santa Clara.

Ballmer said then that the opportunity for Research in Motion and Apple was “probably restricted in some senses” because they sold both hardware and the operating system together.

Windows 7: Microsoft is sure to talk about how consumers will benefit from Windows 7, its next operating system.

At two events earlier this fall, Microsoft pitched the new operating system as a return to the fundamentals — with a set of features designed to simplify tasks that often irk computer users. The company also released a pre-beta version of Windows 7.

A beta version of the operating system leaked last week. Reviewers were struck by how similar it was to the pre-beta version. Few features, if any, were new.

That means that a release of Windows 7 could come sooner than 2010.

So it’s possible that the company will give some guidance as to the operating system’s release date. Much more likely, though, Microsoft will publicly release the beta version of the operating system.

Zune: Despite the high-profile failure of the 30-gigabyte Zune earlier this week, the music player is likely to be mentioned at the show. (Those models had a one-day blackout Dec. 31 blamed on the leap year.) In recent months, Microsoft has emphasized the Zune’s software, as opposed to the player itself, as a way to differentiate it from Apple’s iPod. It’s possible that Microsoft will extend Zune services not only to Windows Mobile but to its Xbox 360 video game console, too.

Ballmer: It’s also Ballmer’s first keynote at the show (previous ones were delivered by Chairman Bill Gates). So, Gartenberg said, Ballmer will want to present a “unifying vision” for Microsoft’s consumer strategy — from phones to TVs to PCs, all connected via the Web.

“They have a very, very strong consumer story that is now spread out among different product groups,” Gartenberg said.

And with Apple CEO Steve Jobs not speaking at MacWorld next week, Ballmer will get all the more attention for what he has to say.